Question

   What is demand?

2. What is the law of demand?

3. Describe the slope of the demand curve? How does the slope reflect the law of demand?

4. List the determinants of demand, or those non-price determinants that can shift the demand curve to the right or left.

5. What is the difference between change in quantity demanded and change in demand?

6. What is supply?

7. What is the law of supply?

8. Describe the slope of the supply curve. How does the slope reflect the law of supply?

9. List the determinants of supply, or those non-price determinants that can shift the supply curve to the right or left.

10. What is the difference between change in quantity supplied and change in supply?

Answer 1

1. Damand means any desire to buy goods with ability and willingness to pay. So a demand should be backed by capacity or ability and willingness to pay. Without willingness and ability to pay is only a wish nothing else.

2. The law of demand shows the negative relationship between quantity demanded of a commodity and its price, other things remaining constant. In simple words it means that quantity demanded of a commodity increases with the decrease in its price and quantity demanded decreases with the increase in its price.

3. Slope of a demand curve shows the ratio of the two absolute change in both price and demand. It can be expressed as, Slope of demand = Absolute change in price/ absolute change in demand

This slope reflect the law of demand in way that it has downward sloping demand curve from left to right and shows negative relationship between the price and damand.

4. Determinants of demand curve are consumers's income, consumer's taste and preference, bandwagon effect, Cosumer's credit facility,consumer's expectation, price of substitutes and complementary goods, population of the country and distribution of the national income. These list of determinants of demand curve can shift demand curve left or right.

5. Change in quantity demand means change in quantity demand due to change in its price other things remaining constant and it clearly shows it has happened due to price effect but in case of change in demand it means shift in demand due to determinants of demand but not by price. So it has no price effect. These are the difference between the change in quantity damanded and change in demand.

6. Supply means the total amount of a particular product or service available to consumers. In other words it means that total amount of goods and services available over a range of prices to the consumers.

7. Law of supply shows the direct relationship between price and quantity supplied other things remaining constant. It means that an increase in supply price will increase the quantity supplied and decrease in supply price will decrease the quantity supplied. So It is in terms of producer side that is producer will offer more and more quantity at higher and higher prices and will make more profits.

8. Slope of supply shows the ratio of change in price and quantity supplies. Since slope of supply has upward slope from left to right so it reflects the law of supply. As i have already written the law of supply meaning from that you can easily understand.

9. Determinants of supply are price of related goods, price of inputs, techonlogy, firm's objective, numbers of sellers and govt. policies. These are the determinants which causes supply to shift right or left.

10. Change in quantity supply means change in quantity supplied due change in supply price other things remaining constant. It shows the movement along the supply curve due to change in its unit price. Where change in supply means change in the process of production. And due to change in the process of production it will shift the supply curve. Now you can see the clear difference between the two.